EconSouth - Fourth Quarter 2007
EconSouth - Fourth Quarter 2007
The Southeastern Economy in 2008
Agriculture Grows Despite Drought
Severe drought, the housing slump, and a weak dollar were the major factors affecting the Southeast's agriculture sector in 2007.
Poultry spreads its wings
In 2007, poultry growers benefited from higher prices and rising demand from growing markets such as Russia, China, and Mexico. However, increased use of crops such as corn for ethanol production drove feed prices up dramatically in recent years and affected poultry producers' margins. As they cut back on the more expensive feeds, they experienced a lower average yield of meat per bird, lowering overall production in 2007. However, higher prices offset the lower production, so most poultry segments in the Southeast saw higher profits in 2007 than in 2006, according to contacts at the University of Georgia.
Multiple challenges confront greenhouse nursery farmers
Lower demand resulting from the housing slump, the drought, and higher costs of energy and fertilizers also challenged greenhouse and nursery growers in 2007. In fact, a company spokesman said that as a result of the drought, Georgia-based Pike Family Nurseries, the largest privately owned garden center chain in the country, filed for Chapter 11 bankruptcy in November.
The going gets tough in the livestock industry
For most of the year, dwindling supplies of hay and other supplemental feeds challenged cattle ranchers, prompting some ranchers to sell their beef cattle sooner than they would have otherwise. According to data from the University of Georgia, regional hay supplies in 2007 were the lowest in 18 years because of the drought. However, exports in 2007 have been strong, driven by demand from Japan and South Korea.
Cotton producers benefit from growing world demand
According to recent U.S. Department of Agriculture (USDA) estimates, production volume and yields this year are down between 27 percent and 38 percent for the Southeast's major cotton-producing states.
On the bright side, despite recent volatility, cotton prices have stabilized and remain higher than last year. The outlook for U.S. exports is still favorable: Recent USDA estimates indicate that foreign cotton demand will outpace foreign production. Lower foreign cotton production and growing demand, mostly from China, pushed the price of cotton up to more than 70 cents per pound in late 2007, about 17 percent higher than a year earlier.
Citrus gets squeezed
Florida contacts reported that several major citrus-producing counties in the state may lose more than 3,000 acres in 2007 to disease and development. Florida's housing slump, which is expected to continue into 2008, will bring mixed blessings to the state's citrus industry. Less construction means less development encroaching on citrus-producing land.
The Southeast's drought also has affected Florida growers. Despite these problems, October USDA estimates predict that Florida's 2007–08 citrus crop will be 30 percent higher than last season's.
Looking ahead to 2008
The ongoing housing slump will bring good news and bad news to Florida's agricultural industry as lower levels of new construction reduce demand for greenhouse and nursery products, but less construction also means less citrus-producing land lost to development. The drought and high fuel prices will increase the cost of livestock feed, which will pose challenges for ranchers in Florida, Tennessee, Alabama, and Georgia in 2008.